J. Crew posts smaller loss as it revamps its business

J. Crew is slowly climbing out of the hole after it moved away from classic styles and raised prices, alienating many regular customers.

J. Crew is slowly climbing out of the hole after it moved away from classic styles and raised prices, alienating many regular customers.

Photo: MIKE SEGAR, Reuters

Photo: MIKE SEGAR, Reuters

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J. Crew is slowly climbing out of the hole after it moved away from classic styles and raised prices, alienating many regular customers.

J. Crew is slowly climbing out of the hole after it moved away from classic styles and raised prices, alienating many regular customers.

Photo: MIKE SEGAR, Reuters

J. Crew posts smaller loss as it revamps its business

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J. Crew Group Inc. posted a smaller fourth-quarter loss after the preppy retailer streamlined operations and trimmed expenses, helping make up for sluggish sales.

Its net loss was $7 million in the period, which ended Jan. 30, the company said Thursday. That compared with a deficit of $30.6 million a year earlier. Same-store sales, a closely watched benchmark, fell 4 percent in the fourth quarter. The decrease was 11 percent in the previous three months.

The results signal that J. Crew is making progress in its comeback plan, even as sales continue to decline. The chain has revamped its products and marketing, CEO Mickey Drexler said in a statement. It’s also keeping a closer eye on costs and inventory. Selling, general and administrative expenses amounted to 32 percent of revenue last quarter, compared with almost 34 percent a year earlier.

“The fourth quarter represented a positive ending to a difficult year,” Drexler said. “Our team is focused on delivering further improvements in the business by executing on our strategic initiatives.”

The company’s $500 million of 7.75 percent unsecured bonds maturing in May 2019 jumped after the results were released.

J. Crew has alienated customers by moving away from classic styles and boosting prices. Same-store sales at the retailer have dropped in seven of the past eight quarters. As Drexler works to reverse this trend, he is adding more of the lower-price Mercantile stores and opening locations overseas.

TPG, one of the private-equity firms that led a 2011 leveraged buyout of J. Crew, cut the value of its stake in the clothing retailer by 84 percent at the end of 2015. The firm told investors that its $478.6 million equity holding in the chain was lowered to $76 million, according to documents obtained by Bloomberg.

J. Crew also has reached an agreement with its banks to increase its borrowing capacity. Lenders will allow the company to borrow $350 million under an asset-based revolving loan, up from $300 million, according to a December filing.

In January, Michael Nicholson took over as chief operating officer and chief financial officer. Nicholson, who came from Anne Inc., will be working to help correct some operational missteps that led to fashion misses in stores and forced J. Crew to increase discounts.